Description

Yemen Oil and Gas Report Q2 2016 Description

BMI View: The ongoing civil war has put Yemen's oil and gas industry to a standstill, as the majority of oiland gas companies and facilities suspended their operations due to security concerns. We expect abovegroundrisks to continue to impact near-term production and challenge longer term efforts to boostinvestment.Latest Updates and Key Forecasts

In February 2016, Australia's Petsec Energy acquired 100% participating interest in, and operatorship of,the Damis Production License in the Republic of Yemen's Block S-1. The Damis PL holds five oil andgas discoveries and a further four undeveloped oil and gas fields. Prior to its suspension in 2014, the AnNagyah oil field within the block produced 25mn barrels of oil since 2004 from 25 wells, reaching a peakoil rate of 12,716b/d (Rigzone).

In January 2016, a blast has hit pipelines connecting oil storage tanks with the refinery in the city ofAden. No damage to the refinery itself was reported.

During 2015, virtually all international oil and gas companies suspended their oil and gas explorationactivities on account of unstable political and security environment in the country. We believe thatpolitical and security risks will remain the major factors limiting Yemen's underground potential, and weforecast the country's oil and gas reserves will decline by 13% and 1.7% respectively across out forecastperiod to 2025.• Yemen's oil production is forecast to decline from an estimated 122,500b/d in 2015 to 93,160b/d by2025, but we note a significant downside risk to these projections arising from the ongoing civil war.• Yemen's gas production collapsed in 2015 due to the closure of the major production facility - YemenLNG. The estimated gas output of just 0.8bcm in 2015 (down from 7.8bcm in 2014) was exclusivelydirected to satisfy domestic needs. We do not see greater gas production in Yemen until the civil warsubsides.